The Royal Bank of Scotland - Case Study Example

To quote Benton E. Gup (31) “The combined forces of demography, technology, regulation, and globalization are driving far-reaching change in the financial services sector.” In 1979 Beckenstein (105-128) in describing the managerial theory of takeovers makes the assumption that increasing interest rates result in the internal projects of companies becoming less attractive, thus causing them to seek external growth through acquisitions as well takeovers. It must be noted that there are numerous other reasons as to why firms would choose to take this path. Such could include (Margsiri et al):
- the addition of assets, such as land, buildings, equipment, cash flow, and or processes,
- newmarket exposure as well as increased customer, and or supplier relationships,
- economies of scale in operational areas,
- broadening of the scope of services as well as geographic reach,
- acquisition of technology, processes, and or customers,
- reaction to internal industry factors,
- increase shareholder wealth and stock prices
Increased merger and acquisition activity, particularly in the banking sector, in Europe has been, and is due to deregulation as contained under the Second Banking Directive that was adopted in 1989, and implemented in 1993 which set the stage for the Euro, and the European Union’s transition to a one market economy (Murphy). The preceding was a process undertaken by the European Union in response to developments as represented by “… globalization of markets and finance, the creation of regional economic blocks such as the … Union (EU), the North American Free Trade Area (NAFTA), the emergence of newly industrialized countries in Asia or Latin America, the introduction of new technologies in product design and manufacturing, and new forms of firms' organization representing just some of the main features of the new international economic order that is emerging” (Canals 1).
It is important to understand is the process of deregulation, as it has had two important effects (Gardener and Versiulujs 2):